California unveils hospice fraud arrests, pushing back on ‘kingdom of fraud’ claim by Trump official

By Chelsea Bailey, CNN

(CNN) — California officials announced Thursday the dismantling of a “massive hospice fraud scheme” they say defrauded the state of more than $267 million in funding meant to provide end-of-life care to ailing residents.

More than 20 people have been charged in the takedown – dubbed “Operation Skip Trace” – and five have been arrested for their alleged involvement in a sprawling network of shell companies that schemed, stole and laundered over a quarter of a billion dollars from the state, officials said at a news conference in Los Angeles Thursday.

“Let this be a lesson to anyone targeting Medi-Cal and hospice care in California – we are on the case, and we’re coming for you,” Rob Bonta, the state’s attorney general, said. Medi-Cal is the state’s Medicaid health care program.

“California has a no-tolerance policy for fraud.”

It comes on the heels of federal officials’ announcement last week that eight individuals in the Los Angeles area were arrested in a $50 million hospice fraud operation.

President Donald Trump has made combatting fraud a central part of his second term, with a particular focus on rooting out the problem in Democrat-led states, such as Minnesota and California.

Administration officials sparred with California Gov. Gavin Newsom’s office and accused the state of failing to address rampant health care fraud in Southern California.

First Assistant US Attorney Bill Essayli, a Trump appointee, called California the “kingdom of fraud” at a news conference announcing those arrests last week. Essayli said the federal government is “providing the oversight that has been missing from California for a very long time.”

Dr. Mehmet Oz, who serves as the Health and Human Services administrator for the Centers for Medicare & Medicaid Services, also touted his agency’s efforts to root out fraud in Minnesota and other states under Trump’s direction, but noted “hospice in Southern California is an entire(ly) different level of fraud.”

Bonta rejected those claims Thursday, accusing the Trump administration of politicizing the widespread issue of hospice and medical fraud “in their attempt to resurrect Trump’s plummeting approval rating.”

“While health care fraud might be President Trump’s shiny new political talking point, California DOJ has been going after health care fraud since 1979,” the attorney general said. “Trump is late to the party.”

In the last decade, the California Department of Justice’s division of Medi-Cal Fraud and Elder Abuse has recovered more than $1.5 billion from civil and criminal Medi-Cal fraud cases, Bonta said.

“This is our area of expertise; it’s our bread and butter. It’s what we do, and we will continue to do it,” he said.

State officials launched “Operation Skip Trace” last spring after receiving a tip concerning alleged hospice fraud at 14 companies, Bonta said.

The investigation uncovered a network of shell companies that were purchasing personal identifying information on the dark web and enrolling out-of-state residents – who were completely healthy and unaware of the scheme – into California’s hospice care system. The companies would then allegedly bill the state for services that were never provided and launder the money through a “complex web” of shell companies,” Bonta said.

“This was a brazen, calculated criminal scheme that exploited the Medi-Cal system, stole from the state of California and Medicaid, and prevented the services and care from going to sick individuals who actually need it,” Bonta said.

If found guilty, he added, those charged could face up to 16 years in prison.

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